You have enough worries – from sales to office space. Choosing an accounting system may seem like the least of your priorities.

Yet of all the decisions you’ll make with a business, getting the right accounting solution is one of the most important.

The right accounting systems can give you near real-time insight into the state of your business, help you reduce taxes and cut tax preparation time and expense. The WRONG choice can leave you without the critical information you need to make smart business decisions.

Selecting accounting software is not an easy decision, and you should do so in consultation with an accounting firm who understands your business and has extensive experience with accounting software. But here is the approach you need to take and some consideration to think about:

Define your requirements.

A proper selection starts with a thorough definition of your requirements in a number of areas. Requirements will vary depending on your industry, so there is no standard list you can use. Requirements need to encompass these areas:

Accounts Payable

Accounts Receivable

Budgeting

Cash Management

General Ledger

Payroll

Purchase Order

Job Costing

Sales Analysis

Foreign Currency Conversion

Work Order Management

Invoicing

Inventory Tracking

Auditing Features

Report Generation

There are a lot of details to consider – some companies need a double-entry general ledger, for example, but some inexpensive off-the-shelf software packages are single-entry systems.

Report generation is an often overlooked feature that is essential, because it’s the ongoing reporting that gives you the important insight into your business. Does the system provide the standard reports you will need to run your company and, if not, how difficult is it to create custom reports?

Complexity

The next consideration is software complexity. Typically, there is a certain trade-off between capabilities and simplicity; the more capabilities a system has, the more complex it is.

If you buy a powerful software package, but it’s so difficult to use that you fall weeks behind in your bookkeeping, you lose the benefit of the system’s capabilities. Yet a very simple accounting package may not have the advanced features you need.

Finding the right middle ground requires that you know your business needs well and you have experience with the major accounting systems.

Expandability

Most entrepreneurs think in terms of only weeks and months – your primary focus is just generating consistent revenue and cash flow. But what happens if you’ve tripled your sales goals in three years – are you going to outgrow your accounting system.

Many companies switch accounting systems as they grow, but it’s something you’ll want to avoid as long as possible. Does the accounting software expand as your needs change? Can you add new modules or have multiple concurrent users? Or, if you have to upgrade to a different system, will the software allow you to export data into a usable format?

Summary

As you can see, selecting accounting software involves more than going into CompUSA and reading the back of software boxes. Let Ablon and Company help you make the decision that will give you a strong foundation for building your business.

These articles are intended to provide resources for the tax and accounting needs of small businesses and individuals. The information contained in this Website is intended to provide general information on matters of interest in the areas of tax and accounting. Users are encouraged to contact us regarding specific situations.